The Producers 2018: Amaroq sets course at Nicolai Creek

A five-well workover program yields production increase but investment is needed to preserve field

Eric Lidji

for Petroleum News

Amaroq Resources LLC alleviated confusion in three ways over the past year.

The first was its name. The company started the year as Aurora Exploration LLC. But it was not affiliated with the former Aurora Gas LLC, despite a shared history in the Cook Inlet region, and it adopted the name Amaroq in April to avoid inevitable misattributions.

The second involved regulation. The purchase of the Nicolai Creek unit was delayed in late 2017 by a dispute over bonding. The Alaska Oil and Gas Conservation Commission initially required several million dollars worth of bonds to guarantee the plugging and abandonment of six Nicolai Creek gas wells. The company said that the amount would render the field uneconomic. The commission later reduced the requirement to $200,000.

The third was its direction. Amaroq completed its purchase of the Nicolai Creek unit from Aurora Gas in January 2018 and set in motion a development program at the west side Cook Inlet natural gas field. Instead of pursuing a development well proposed during the months of transition between the companies, Amaroq focused on maintenance and workover activities designed to improve operations and production at existing wells.

Workovers

The development program started with a compressor repair that Amaroq credited with doubling production at Nicolai creek and continued with a major sand clearance effort.

A series of workover operations at several wells over the summer months yielded mixed results - increasing production in some cases and necessitating shut-ins at others, according to a 45th plan of development submitted by Amaroq in late September 2018.

The company did not drill at the Nicolai Creek unit during the current development year and had no plans to do so in the remaining months of the cycle, which runs through the end of December. But the company conducted workover operations on at least five existing wells at the onshore Cook Inlet, mostly to check for and clean out sand fill.

The company ran slickline at Nicolai Creek No. 2 in August 2018 to evaluate the potential for future production or storage. The company identified mechanical issues, and the well is currently shut in until the company can gather additional information.

The Nicolai Creek No. 3 well will remain shut-in until the company can obtain 1.25-inch coiled tubing, which is unavailable in the Cook Inlet region at the present time.

A slickline operation on the Nicolai Creek No. 9 well in the third quarter of 2018 addressed fill identified in an August 2016 operation. The recent operation resulted in an approximately 50 percent increase in production. The well produced 38.4 million cubic feet through the first eight months of 2018, according to production figures in the plan.

As of September, Amaroq was evaluating the economics of conducting a rig workover of the Nicolai Creek No. 10 well sometime in 2019 to replace damaged tubing and to implement sand control. The company attempted to workover the well in the third quarter of this year but discovered parted tubing in the well, which required rig work.

Prior to the attempted clean out, Nicolai Creek No. 10 had been producing from the Carya 2-1 sand. The previous operator had comingled the Carya 2-1 with the Carya 2-3 in May 2015, but fill discovered in December 2015 and August 2016 closed the Carya 2-3.

The Nicolai Creek No. 10 well produced 25.6 million cubic feet through the first eight months of 2018, according to figures provided by Amaroq in the development plan.

A coiled tubing workover of the Nicolai Creek No. 11 well in the third quarter of this year increased production by approximately 85 percent, according to Amaroq. A previous slickline check from December 2015 had discovered sand blocking the completion in the Lower Tyonek formation and attempts to clean out the sand failed. As a result, the well had been producing only from the Beluga formation. The well produced 27.7 million cubic feet through the first eight months of the year, according to figures in the plan.

The company reported no activity on the Nicolai Creek No. 1B well, which produced 10.2 million cubic feet through the first eight months of the year, according to the plan.

Development

Amaroq proposed a similar work plan for the coming year.

The biggest projects on the agenda were the rig workover of the Nicolai Creek No. 10 well and any economically and logistically feasible workover projects at other wells.

In its plan, the company also acknowledged the potential of the Nicolai Creek No. 12 well. Aurora Gas proposed the well in its 44th plan of development, submitted last year.

“Additional evaluation of geologic and seismic data will be necessary to determine the economics of this well,” Amaroq President G. Scott Pfoff wrote in the newest plan.

The proposed well would target deeper sands to the north of the unit, in an area beyond the reach of the existing Nicolai Creek No. 3 well. The 5,650-foot well would target the Beluga and Upper Tyonek sands found in the Nicolai Creek No. 3 and No. 10 wells.

In addition to development activities aimed at increasing production, Amaroq was also considering an earlier plan to convert the Nicolai Creek No. 2 and Nicolai Creek No. 9 wells into a gas storage operation capable of holding between 2.5 billion and 3 billion cubic feet. The plan could potentially include a new horizontal well. “While there has been renewed interest in this project, studies have not yet commenced. Commencement of feasibility studies, leasing, permitting, and implementation are all possible during this 45th Plan period but are not planned at this time,” Pfoff wrote in the development plan.

Without additional investment, either through development drilling or gas storage, the Nicolai Creek unit will likely become uneconomic in 2022, according to Amaroq.

Exploration

Amaroq also said it remains interested in a plan to explore for deeper oil and natural gas deposits beneath the Nicolai Creek unit but is not planning to pursue the project in 2019.

Aurora Gas had sold those rights to Apache Alaska Corp., which acquired 3-D seismic over the acreage in early 2012. Apache withdrew from Alaska exploration activities without advancing the project. “Nonetheless, Amaroq Resources is interested in acquiring and/or accessing this new seismic with plans to interpret and evaluate; and along with other geologic data, determine possible exploration, development, and extension drilling targets at all depths,” Pfoff wrote, while noting that the work was unlikely in 2019.

The company has also been searching for funds to pay for exploration programs at its Chedatna Lakes and North Alexander prospects, on the west side of the Cook Inlet.